Weak Global Cocoa Grindings Undercut Cocoa Prices

March ICE NY cocoa (CCH23) on Friday closed down -1 (-0.04%), and March ICE London cocoa #7 (CAH23) closed down -4 (-0.20%).

Cocoa prices Friday posted modest losses, with NY cocoa falling to a 1-month low and London cocoa falling to a 5-week.  Weakness in global cocoa demand weighed on cocoa prices.  The National Confectioners Association reported late Thursday that Q4 North American cocoa grindings fell -8.1% y/y to 107,130 MT.  Also, the European Cocoa Association reported Thursday that European Q4 cocoa grindings fell -1.7% y/y to 359,577 MT.  On Wednesday, the Cocoa Association of Asia said Asia Q4 cocoa grindings fell -0.2% y/y to 230,806 MT.  

Cocoa prices were already on the defensive from ample cocoa supplies from the Ivory Coast after Monday's report from the Ivory Coast government showed that Ivory Coast farmers sent a cumulative 1.45 MMT MT of cocoa to Ivory Coast ports for the 2022/23 marketing year from October 1 through January 15, up +11.5% y/y.  The report eases concerns that the Harmattan winds are damaging West African cocoa crops.

An excessive long position in London cocoa futures could fuel long liquidation pressures after last Friday's weekly Commitment of Traders (COT) report showed funds boosted their net-long London cocoa positions by 5,693 the week ended January 10 to 88,812, a 7-year high.

Last Monday, NY cocoa rallied to an 11-month nearest-futures high on concern the seasonal Harmattan winds could lead to excessive dryness that limits the flowering of cocoa trees and reduces West African cocoa yields.

NY cocoa continues to see underlying support from tighter cocoa supplies.  ICE-monitored NY cocoa inventories held in U.S. ports have trended lower over the past four months and fell to a 9-month low on January 3.  Also, ICE-monitored cocoa stockpiles held in EU ports remain at a 9-month low of 112,880 MT.

Cocoa prices have seen support from concern about the quality of some West African cocoa crops.  Cocoa farmers continue to struggle with the lack of fertilizer and pesticides as the war in Ukraine has limited Russian exports of potash and other fertilizers worldwide.

The quarterly report from the International Cocoa Organization (ICCO) on December 1 was bullish for cocoa prices after ICCO said global 2021/22 cocoa production fell -6.8% y/y to 4.89 MMT as unfavorable weather and disease hampered cocoa yields.  ICCO revised its 2021/22 global cocoa production figure downward by -67,000 MT from the September figure.

Larger cocoa exports from Nigeria are bearish for prices.  News on December 22 showed that Nigeria's Nov cocoa exports jumped +130% m/m and +17% y/y to 36,819 MT.  Nigeria is the world's fifth-largest cocoa bean producer.

Cocoa prices found support when the ICCO on September 1 raised its 2021/22 global cocoa deficit estimate to -230,000 MT from a June forecast of -174,000 MT.  In 2020/21, global cocoa production rose to a record 5.24 MMT, and in 2020/21, the global cocoa market was in a surplus of +215,000 MT.
 

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